Canadian shoppers are redefining value amidst persistent economic pressures. Circana’s latest Consumer Outlook Report reveals that while inflation has stabilized, most Canadians still feel its weight in their everyday purchases, with 73% noting no significant drop in prices.
Some key points from the report:
- 54% of Canadians will look for a lower-priced brand to reduce spending;
- 58% plan on decreasing their spend on non-essentials (up 20 points vs. June 2020);
- 56% prioritize the price of the product when looking for value.
Cheryl Ong Seng, Managing Director, Circana Canada, described Circana as a market research company.
“If you’re passionate about cooking, imagine a pressure cooker. Consumers are in this pressure cooker today with an extra burden that weighs heavily on them. Consumer confidence in spending is at an all-time low. From Circana’s consumer panel, we’ve got a staggering 73% of Canadians who are not noticing any decline in price increases. We continue to see double-digit dollar sales growth versus single-digit unit sales growth. That is very evident and consistent across industries like general merchandise and groceries.
“Consumers are adapting and they are figuring out how they can continue to be smarter with their spending, which is deteriorating. How can they spread that dollar. One of the things we are seeing as a heightened trend with consumers is the concept of value at the top of the pyramid for their decision-making. That is definitely an important concept that retailers and brands need to prioritize in terms of their 2025 strategic outlook. What does value mean to consumers? Understand that . . . Our consumer panel shows that a staggering 58% when they think about value they’re prioritizing product quality.”
She said consumers are increasing looking at promotions especially those tied to loyalty rewards.
“I think the pressure cooker concept is just going to get worse to be honest.”
But it’s not all doom and gloom. There is always a light. Understanding the concept of value and applying it to strategic outlook is an area retailers need to focus on. However, Ong Seng said consumers are spending on some luxury items.
Given this environment, retailers should focus on capturing cash-strapped consumers with concise communication and finding opportunities for everyday, inexpensive luxuries.
“For example, I love eating cheese, but it’s kind of got to the point where I can’t be buying high-end (varieties) every single day. What used to be a commodity is now deemed as a luxury. There are opportunities for retailers and brands to create memorable experiences with the consumer. I think this is where the live entertainment business and the travel is in their favour. It’s a memory that consumers are creating . . . That same concept of creating that special experience and memory with commodity-type items, inexpensive items, I think is still very important for these retailers and brands to focus on,” she said.
And in this landscape, technology, especially AI, play an important role.
“AI is a fundamental aspect of any business out there to be able to succeed,” said Ong Seng, adding that the surface has only been scratched. AI at the end of the day will streamline decision-making processes, reducing time spent on analysis and speeding up responses with automated recommendations. It touches all aspects of business, from marketing and content creation to supply chain and sales forecasting.
“There is a difference in understanding all the buyer demographics, especially with the Gen Z and the millennials. These group of consumers are more than willing to take a snap shot of themselves and put it on social media. Instagram. TikTok. That is definitely something that retailers and brands have an opportunity to leverage. Invest in those areas. Have your marketing team be scraping the web for new trends, get there quickly, be able to act and be agile to be able to stock, hit the market and activate. These are also important aspects for any retailer or brand to be able to succeed in this new kind of pressure cooker world. Take advantage of all of the consumer trends out there because at the end of the day it’s being more attuned with the consumer needs is more critical nowadays than ever than we’ve seen historically.
“And this is where AI plays into it. Getting there faster, scraping faster and removing a lot of that time spent, manual labour spent on it.”
“It’s crucial in this pressure cooker environment. AI supports this by speeding up processes and reducing manual labour.”
The Circana report said lower consumer confidence is driving its expectation for slowing sales growth.
“Inflation has come down substantially since its June 2022 peak. When looking through a longer-term lens, we see a convergence in inflation rates and consumer confidence. Inflation in August 2024 reached the Bank of Canada’s 2.0% target, yet consumer confidence in Canada remains low, 10 points below the 2020 index and 33 points below the U.S. General merchandise prices remain 10% above 2019 despite recent regulation. Lack of confidence and squeezed discretionary spend are also driving our expectation for challenged sales growth in Q4 2024 and the start of 2025,” it explained.
“The battle for value supremacy is the preeminent issue for the retail industry in 2025. Winners will communicate value simply and saliently. But what does good value mean to Canadian shoppers? In fact, there are different ways that we perceive good value, and understanding these nuances is critical. For example, 39% of Canadians prioritize product quality when looking for value. Our panelists rated the importance of quality relative to other factors when prioritizing value. And while cost is important, the monetary factors are more important for younger ages. However, the gap in promotion sentiment and loyalty rewards was most acute with younger Canadians much more reliant on both.
When adopting a value mindset, our research reveals that Canadians prioritize the quality of products that are consistently good. It’s a reminder that focusing only on price is a risk, particularly with shoppers trading down. This also signals a warning about moving too much to everyday low pricing strategies. For Canadians right now, access to promotions and special offers is regarded as more important than price consistency.
“Prioritizing quality is apparent across ages, yet fixation on the lowest prices is less important as we age. However, there is some consistency in demographics emerging, with younger buyers significantly over-indexing for promotions and loyalty rewards. For retailers and brands, it is imperative in 2025 to take a more granular view to unlock category and brand specific drivers of what represents good value.”
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